A SYMPOSIUM OF VIEWS
THE MAGAZINE OF INTERNATIONAL ECONOMIC POLICY
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Is Continued
Globalization
of the
World Economy
Inevitable?
Some analysts argue that lasting cultural rigidities will obstruct or
perhaps even reverse the globalization process. Others counter that deep
down everyone is truly Economic Man. Everyone, as New York Times
columnist Thomas Friedman’s book title implies, dreams of one day
owning a Lexus. What are the chances the globalization process of recent
decades will be seriously obstructed or will actually begin to reverse?
Thirteen experts offer their views.
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Yes and no
Globalization is
(but probably yes).
not inevitable.
JAGDISH BHAGWATI
ANTONIA JUHASZ
Senior Fellow, Council on Foreign Relations, and University
Professor, Columbia University; author of In Defense of
Globalization (Oxford, 2004)
Project Director, International Forum on
Globalization, and co-author of the upcoming
2nd edition of Alternatives to Economic Globalization:
A Better World Is Possible
s (economic) globalization reversible? Yes and no. Since
increased integration of the world economy reflects two
forces—improved and cheaper communications and
transportation and policies such as freeing of trade—a reversal is perfectly possible. This is what interrupted the First
Wave of Globalization of 1870–1914. At the same time, the
current Second Wave of Globalization is unlikely to be interrupted, at least in the near future, by policy reversals.
First, in trade, we have the WTO which has made it
ever more difficult to indulge in the 1930s-style competitive raising of trade barriers. We have binding tariffs; we
also have orderly ways of raising tariff barriers (as with
safeguards actions) in politically difficult circumstances.
In the East Asian financial crisis, these new realities helped
eliminate the conventional response of abandoning freer
trade as a way of dealing with the crisis.
Second, multinationals have become an important fact
of life. Virtually all countries, no matter what their political
rhetoric, are anxious to compete for multinationals. The left
still agitates against multinationals, as do several non-governmental organizations; but they remain an indisputable
force and policies towards them are easing, not tightening.
Third, on international migration, demographics are beginning to produce more open doors and benign attitudes.
Many OECD populations are below reproductive levels, and
their social security systems are facing bankruptcy as their
populations age. Immigration suddenly looms large as a way
of dealing with labor shortages and the social security problem. At the same time, the advantages of skilled immigration
are reflected in shifts of legal immigration systems toward
importation of more skilled workers, even as the developing
countries with such manpower are happy to oblige.
Fourth, and finally, while the financial crises resulting from freeing of short-term capital flows may not be
brought fully under control, we have learned some
lessons—such as the need for reformed and stronger banking systems—that should reduce the probability of occurrence of such crises.
I
lobalization is not an inevitable process. It is one
set of policy priorities chosen by certain political
and economic elites to achieve a centralized economic model in which global corporations act as the engines of economic growth. Alternative policies do and
have always existed.
“Globalization” refers to a continuation of the processes of colonialism and imperialism, with a new post-WWII
emphasis on the specific neo-liberal policies of free trade,
financial market liberalization, deregulation, and privatization. It is a model based on the taking of resources—human, natural, and capital—from the many for the benefit of
the few.
Even in 1944 when the main institutions of modern
globalization were being created—the World Bank, the International Monetary Fund, and what would become the
General Agreement on Tariffs and Trade—alternative proposals were put forward to shift the responsibilities for development, trade, and global finance to the Third
World-dominated United Nations. These attempts were rebuffed as the United States and Europe in particular came
to increasingly use the institutions as tools for expanding
corporate access.
Globalization’s fire is running into constant and increasingly regular rejections. The reason may best be explained by the United Nations in its 1999 Human
Development Report: “The new rules of globalization—
and the players writing them—focus on integrating global
markets, neglecting the needs of people that markets cannot meet. The process is concentrating power and marginalizing the poor, both countries and people.”
Those people are now electing new leaders and banding together themselves to form a strong, diverse, and
growing movement for change. They are proposing meaningful alternative policies—many already in practice—
that prioritize equality, environmental and social
sustainability, and economic justice.
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No, globalization
will go into reversal
when oil hits $60
a barrel.
GEORGE MONBIOT
Columnist, The Guardian
lobalization is likely to go into reversal as soon as
oil reaches a certain price: let’s say, as a wild guess,
$60 a barrel. This will inhibit the international transport of both goods and people. If the price rises because
the resource is becoming scarce or hard to obtain, this reduction of international contact is likely to be accompanied by increased international conflict. The poorer nations,
which will find oil much harder to buy (already they pay far
more per barrel than the rich ones) will deeply resent the
richer nations. They will be hit hard by rioting, and their
governments will seek to blame outside forces for the problem. The rich ones, sensing that economic survival depends
on securing continued access to the resource, will begin to
jostle each other. We have have seen the beginning of this
in Iraq, which is or was a key producer or future producer
for France, Russia, and China, and is seen as a critical future source by the United States.
Here’s another wild guess: that the price of oil will top
$60 within five years, and $100 within ten. There are many
aspects of globalization I will be sad to see lost, and there
are others I’m not so worried about. But we might find, in
the coming oil famines, the preconditions for the kind of
global democratic revolution I’ve been pressing for. Alternatively we might see a massive reactionary backlash.
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Probably yes,
but nothing in life
is inevitable.
JOSEPH S. NYE, JR.
century example,
Professor, Harvard University and author of Soft Power:
The Means to Success in World Politics
globalization
reversing.
LIONEL BARBER
U.S. Managing Editor, Financial Times
THE INTERNATIONAL ECONOMY
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Despite the late-19th
it’s hard to see
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or all its merits, globalization must never be taken for
granted. The continued integration of the world economy depends on support not only from rich beneficiaries in the west but increasingly from the still disadvantaged
in Africa, India, and Latin America. Cultural barriers also
pose increasingly powerful obstacles to globalization.
The rise of Islamic fundamentalism offers an alternative vision of society, one which will appeal to all those
left behind in countries with exploding populations and
persistent high unemployment among young people.
Yet there are still plenty of reasons for optimism. The
benefits of globalization in terms of investment, jobs, and
competition are there for all to see, on cable television
screens as well as in the shops and soukhs. The forces in favor of globalization are far stronger than those pitted against.
Therefore, it is hard see how globalization could reverse. True, the late 19th century saw accelerating globalization but it came to a juddering halt after the First World
War. But there is no reason to believe that we are heading
back into the 1930s and the world of Smoot-Hawley.
In the early 21st century, we can look forward to
greater integration of capital markets and trade, providing
the United States continues to play the lead role. In this respect, progress toward a new Doha trade round agreement
will be an important benchmark. Systemic terrorism and/or
a cataclysmic event such as a world war would force a
reappraisal. But for the moment, continued globalization
of the world is both necessary and inevitable.
SUMMER 2004
ther things being equal, economic globalization will
continue. But that is like any joke about economists’
assumptions. Every market depends upon a political
framework of security, and when security is plentiful we
tend to ignore it. But like oxygen, once we begin to miss it,
we can think of nothing else. Nineteenth-century economic globalization was interrupted by a security crisis in 1914
and the world did not recover similar levels of economic
integration until the 1970s. Yet during those years, military
O
globalization grew apace, with two world wars and a cold
war. And ecological globalization continued with the spread
of infectious diseases and the beginnings of climate change.
The pace of technological change makes continued globalization inevitable, but which type? As we learned on September 11, globalization has a malign as well as a benign
face. Between 1970 and 2000, the thousand-fold decrease in
the cost of computing and communications that we call the
information revolution enabled impressive increases in trade
and investment. It also enabled transnational terrorist groups
like Al Qaeda to organize cells in sixty countries, and to kill
more Americans than the government of Japan did at Pearl
Harbor. In a sense we are seeing the privatization of war,
and as yet we have not developed a strategy that uses our
complete toolkit of military, economic, and soft or attractive
power to deal with the problem. Yes, the global economy
survived September 11, but would it survive several such
events, including nuclear, radiological, or biological attacks?
Nothing is inevitable; security policy choices matter.
the world, people increasingly understand that they must
encourage all of their citizens to reach their potential, or
their county won’t reap the benefits of global economic
growth. And these citizens can’t reach their potential without laws, regulations, policies and values that support the
protection of basic human rights. This insight is increasingly shared in the Middle East and even China. Meanwhile, the agents of globalization—multinationals—are
taking greater responsibility to promote human rights, in
concert with governments and activists.
Friedman’s vision of the way forward is to “manage”
globalization, by addressing the inequalities between people and among states globalization creates . This prescription is helpful but inadequate. The developed world must
also put more funds and effort towards building the capacity of individuals, civil society groups, and governments
to promote basic human rights. Only in that way can each
individual, nation, and the world meets its potential in the
global village we call home.
No, it’s hardly
Thomas Friedman’s
inevitable.
vision is inadequate.
SUSAN ARIEL AARONSON
Senior Fellow and Director of Globalization Studies,
Kenan Institute, Kenan Flagler Business School,
University of North Carolina
n an influential 1967 book, The Search for Order, historian Robert Wiebe described how Americans dealt with
the challenges of industrialization, immigration, and urbanization in the late nineteenth century. He noted that as
citizens moved from the villages to the city and from farm
jobs to factory, they maintained their small town “village”
values. But these values did not fit the world these men
and women confronted. By the end of the first World War,
he notes, Americans embraced new values of functionality, administration, and management. These new Progressive values helped the American people make sense of their
rapidly changing and often chaotic world.
Thomas Friedman built on Wiebe’s insights. He rightly notes that globalization has pulled citizens between the
values that call for buying that Lexus and the values of
their village. But Friedman ignores a core value shared by
citizens in small villages and global capitals alike. Around
I
ROBERT HORMATS
Vice Chairman, Goldman Sachs International
o—continued globalization is not inevitable. Globalization has been reversed in the past by wars, depressions, and shortsighted policies. It could be reversed
again by a period of prolonged unemployment in major
economies, resulting in competitive devaluations, protectionist measures, or xenophobic immigration policies. A
new wave of terrorism could increase barriers to the flow of
goods (through tighter border controls) and people (through
tighter immigration and visa policies) in many nations.
Globalization could be weakened severely if continued
large U.S. fiscal and current account deficits lead to disruptions in global currency and capital markets. Failure of
the United States to strengthen K-12 education, especially
in science and math, could cause large numbers of Americans to believe they cannot compete in the knowledgedriven global economy and thus to support new restrictions
to shield the country from foreign completion.
And if large groups of people in the world’s major
emerging economies perceive that globalization benefits
the elite while leaving them behind, they could press their
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governments to resist further liberalization of trade and
capital flows—or reverse previous liberalization.
But this is not the most likely scenario. The greater
probability is that the process of globalization will continue, although perhaps not at the pace of recent years. The
reason is that more and more people have a stake in its success. Corporations are under pressure from consumers and
investors to seek low-cost goods and services worldwide—
whatever their source. American, European, and Japanese
consumers vote with their dollars, euros, and yen for free
trade every day. Low-income consumers have a special interest in the inflow of low-cost goods. All would suffer
from a reversal of globalization.
Advances in technology—dramatic increases in broadband capacity and dramatic drops in the cost of information
transmission—facilitate robust global supplier/importer networks. Corporations integrate production and supply chains
across borders and continents. Billions have shed communism, socialism, and ponderous regulation in the last two
decades; they want the opportunity to sell their manufactured goods, farm crops, and services in a global economy
and have access to the plentiful products it supplies. Many of
their jobs depend on exports to industrialized nations.
But good policy is needed to ensure that globalization
produces wider and sustained benefits for larger numbers
of people, while fewer see it as a threat. If leaders portray
trade and international competition as a war in which one
side wins and the other loses, globalization can be derailed
or slowed dramatically. But it is not like a war. It is more
like a marathon, in which great runners do best when challenged by other great runners. If leaders can rally their people to see foreign competition as a challenge rather than
threat, and improve their policies and education systems
to enable their citizens to better respond to it, globalization
will not only continue but also become increasingly robust.
No, globalization
did not come written
in stone from Mount
Sinai with Moses.
LORI WALLACH
Director, Public Citizen's Global Trade Watch
he current system of corporate-led globalization is not
inevitable like the moon’s pull on the tides, despite
public relations efforts to create that impression on
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the part of those who benefit from this model. This system
also did not come written in stone down from Mount Sinai
with Moses. Rather, it is only one version of how the world
economy can be organized. This version of global economic order was only brought about through an enormous
amount of planning, public relations, and political work.
This included replacing the GATT trade regime with the
expansive World Trade Organization—which its former
Director General Renato Ruggiero once famously called
“the constitution for the new global economy.”
The terms of the WTO and regional international commercial agreements and the structural adjustment programs
of the International Monetary Fund and World Bank are
anything but inevitable: they embody a wide range of policies implementing what is often called the neoliberal worldview. While trade is both inevitable and can be very
beneficial for producers and consumers, there is nothing
preordained about setting one-size-fits-all policy requirements on an array of domestic policy issues unrelated to
trade but at the core of the corporate globalization agenda
of privatization, deregulation, harmonization, and new
property protections.
The operating clause of the WTO is that every signatory “shall ensure the conformity of its laws, regulations,
and administrative procedures” with the WTO terms.
Where GATT was limited to trade in goods and based on
objective principles like most-favored nation status, the
WTO, the North American Free Trade Agreement and other instruments of corporate globalization require countries
to transform their domestic policies to adopt uniform policies on who can own services operating within the country
and how they can be regulated; on intellectual property, investment, food safety and inspection, environmental standards, and more. These are subjective rules—setting
priorities (patent protection for medicines and seeds ahead
of access to medicine for poor consumers or seed saving for
subsistence farmers) and shutting down the space for democratic choices. It is not good enough under these rules if
countries treat each others’ companies and goods the
same—i.e., non-discrimination. Rather, these agreements
establish affirmative duties all governments owe foreign
investors and forbid all governments from using certain
policy tools—including many of those that today’s rich
countries used to develop, like performance conditions on
investment, buy local procurement, and more. Consider
the WTO and NAFTA agricultural rules—quotas had to be
eliminated immediately, turned into tariffs and phased out
altogether. Poor countries used quotas to manage supply
and thus set a price floor because they could not afford to
pay subsidies. Rich countries’ subsidies were allowed to
remain—and under the rules the United States has even increased some farm subsidies.
Given the failure of this anti-democratic model to raise
global standards of living (if you eliminate China, which
has been largely outside this system operating in contra-
vention to many of its tenets from the calculation, the percentage of people living on $1 per day has increased in the
era of corporate globalization), reduce poverty, or promote growth, the corporate-led globalization model can
and should be discarded in favor of a system that works—
one that does not create a race to the bottom in standards
of living, promote hunger and turmoil by ruining millions
of small farmers’ livelihoods, and increase income inequality within and between nations.
The critics of this failed model are a global movement for democracy and diversity. We believe that the
people living with the results must make the decisions
important to their lives and families. Inherently, this means
that there will be differences in priorities and choices depending on the local values and cultures of different people and the level of development of their country. We are
for internationalism—where different cultures, countries
and people trade and exchange goods and ideas and work
together towards common goals—not for corporate economic globalization which imposes a one-size-fits-all
model of economic and social policy worldwide.
to understand this region as the product of a political economy whose requirements exceeded and/or failed to coincide with local structural capacities.
So globalization of one sort or another is indeed inevitable (and always has been), but the jury is still out on
what globalization actually means for much of the world.
It is also difficult today to identify who precisely controls
this process since in many regards it has evolved into
something far greater than merely the sum of its parts
(trade regimes, “consensus” in Washington). Massive rollbacks are unlikely, but globalization as we know it may
well become somewhat scattered and stagnant. The key is
to create stakeholders who understand themselves as active participants and shapers of exchange systems and
communities that perhaps do not conform to a single model, but are compatible with many. Think of pragmatic, locally produced modules (micro-industries, networked
co-operatives) that leverage a common infrastructure:
open source globalization.
Globalization
cannot be restricted
an uneven
to homogenization.
phenomenon.
©AIC, GABRIELA BRANDENSTEIN
Yes, but as
HANNES ANDROSCH
PETER MANDAVILLE
Director, Center for Global Studies,
George Mason University
es, but it will continue to be a highly uneven phenomenon, producing numerous conflicts along the
way. There are in fact multiple globalizations afoot
today—a morass of circulating people, capital, commodities, and ideas—resulting in a process far more complicated than the standard account of interconnected
markets and technical homogenization. Culture is indeed
part of this mix, but Huntington got it all wrong. The conflicts of today and the future will occur not along the fault
lines of civilizations (history teaches us that intercultural
encounter is usually something far more nuanced and ambivalent), but rather along the fault lines of globalization.
The shape and fate of the modern Middle East, for example, should not be viewed primarily as a cultural equation
with Islam or other supposedly disparate value systems
as the determinant variables. Instead we would do better
Y
CEO, AIC Androsch International Management
Consulting GmbH
he current phase of globalization is highlighted by
three principal characteristics: the reduction in the
time required to travel between countries, a declining
association between cultural differences and geographic
region—one need no longer travel to experience Cantonese cuisine or to live according to Confucian perspectives—and the intermeshing of the markets for goods,
services including financial services, and labor across national boundaries. Firms continue vigorously to create
value wherever the most favorable conditions prevail, including there, where new market opportunities present
themselves.
The progress associated with industrialization has led
to widespread improvements in welfare in the industrialized countries. For the emerging market countries such
as China, India, and Mexico, economic development, driven by internationalization, has also led to dramatic
progress. Economic globalization has accelerated this
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process. Opposition to globalization would rob poor countries of this opportunity, with the inevitable implication
that they would become even poorer.
North Korea presents us with a perfect example of
what can befall a country when it withdraws from the
globalization process. This least globalized country in
the world also happens to be one of the poorest. The
same applies to large tracts of Africa. As a further shocking example of an isolationist regime, one could count
the former Taliban government in Afghanistan, which
was as horrifying for the Islamic world as for the West.
On the other hand, the highly developed industrial countries face a special challenge: to manage the structural
change associated with globalization and the transformation to a knowledge economy in an efficient and socially just manner.
Nevertheless, the meaning of globalization cannot be
restricted to homogenization, or a perfectly inappropriate
drive for uniformity. Cultural dominance is every bit as
much a threat as economic hegemony. In any case, economic globalization presupposes, and requires, an equitable organization of international trade and new rules of
conduct. In view of the poverty and distress being suffered by billions of our fellow humans, it is surely an obscenity when a thousand billion U.S. dollars is being
squandered on armaments worldwide, and a further $350
billion is being spent on agricultural subsidies; yet a mere
$50 billion is being provided for development aid, including expenditure towards the war on AIDS.
The process of globalization must be accompanied
by a global political concept, in which worldwide prosperity and quality of life are accorded the same importance and status as the goals of democracy, freedom, social
solidarity, and peace.
continued globalization is not inevitable. The future of
globalization will depend on decisions taken by our societies individually and collectively.
The real question is whether continued economic
globalization is desirable. Greenpeace opposes the current form of globalization that is increasing corporate
power. Free trade at all costs is leading to the overuse of
natural resources, more pollution as we produce and consume more, and greater inequities both among and within countries. This kind of globalization will and should
be obstructed. If it were to continue unchecked, the global ecosystem will collapse. Business as usual is in real
danger of undermining the ecological basis of our economic system.
Greenpeace, to be clear, is not against global trade.
But the current global trade system too often does not deliver societal benefits. Much of the timber imported into
developed countries is, for example, from illegal logging.
This can enrich corrupt individuals, while destroying the
livelihoods of peoples depending on forests. One third of
global trade is also in like products. Apples from California are flown to Europe, while apples from New Zealand
are flown to California. Is such trade truly necessary?
Could the energy spent on transporting these goods not
be put to more productive use? And does an apple from
around the corner often taste better than one that has travelled many thousands of kilometers?
The global economy lacks enforceable global social
and ecological rules. Global corporations can, for example, not be held liable for their actions globally. Twenty
years after Bhopal—the worst chemical disaster in human history—the Indian factory site still bleeds poisons
daily, while the survivors have never received adequate
compensation. This will have to change. A global economy requires a binding international instrument for corporate accountability and liability.
It’s not
Don’t confuse the
inevitable.
irreversible trend
with Friedman’s
“system” of
globalization.
DANIEL MITTLER
Political Advisor, Greenpeace International, and does not
own—or desire to own—a Lexus
conomic globalization was not inevitable. It was and
is the result of human decisions. Globalization serves
specific political and economic interests. Therefore,
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DAVID ROTHKOPF
Chairman, Intellibridge Corp.,
and Deputy Undersecretary of Commerce for
international trade policy
during the Clinton Administration
ebating whether or not globalization is likely to
continue or whether it can be reversed is like debating whether evolution has much of a future. The
problem is that people have confused globalization—the
irreversible historical trend with globalization—the “system” discussed by Tom Friedman in the Lexus and the
Olive Tree.
The “system” really refers to the facets of globalization that are being promoted by economic interest groups
that see the process of global integration and the expanding network of connective tissues linking every portion
of the globe as one that can benefit them and others. They
seek to promote its progress and work to advance laws,
policies, investment flows, the creation of new infrastructure, and other steps that will link markets, open
them, connect peoples, and remove barriers between social groups.
As a consequence, the term “globalization” has come
to be a code word that also encompasses many of the
flaws within the economic and political systems most
closely associated with the advocates of the process. That
is, “globalization” is a code word in many parts of the
world for the spread of “American” influence, for cultural imperialism, for the imposition of western values and
for the inequities that have yet to be addressed even in
many advanced societies.
Globalization—the irreversible historical trend—is
something else again. It can’t be legislated and will
bounce off of it like the bow waves at the prow of a great
ship. It is more akin to the industrial revolution…indeed,
it is merely the next stage of that revolution in which new
technologies are transforming societies in profound ways,
increasing human productivity, making distance increasingly less relevant, making instantaneous communications possible anywhere and anytime , thus knitting the
fabric of humanity more closely together all the time.
Of course, the allies of globalization the system have
this historical trend on their side. But they should not be
too complacent. Although the progress of history cannot
be reversed, their system and some of the values and
processes they hold most dear certainly can be contained
or seriously impeded. Indeed, they will be to the extent
that those systems do not more effectively and speedily
deal with the inherent inequities that the processes of globalization make more visible worldwide. The same technologies that enable globalization—the information and
transportation revolutions—can be used to create new
global alliances and to empower the previously disenfranchised to a degree heretofore unimaginable.
Globalization is right now a two-speed process by
which elites benefit and become a global class and others
are left farther and farther behind. The next stage of the
process and of related political and economic reforms
must make much larger segments of emerging societies
stakeholders in the processes of globalization, lest the ir-
D
reversible historical trend be known for the massive, violent, transitional disruptions its caused.
Conflict
undermines
globalization.
HAROLD JAMES
Professor of History, Princeton University
ontinued globalization certainly isn’t an inevitable
and inexorable phenomenon. There have been several previous waves of “globalization,” with increased integration of capital, labor, and goods markets
and impressive technical improvements, in the late nineteenth and early twentieth century, but also in the eighteenth century. The earlier episodes came to an end in
large measure because of domestic political reactions to
new inequalities apparently generated by globalization.
We can see clear signs of such domestic reactions today in
the big industrialized countries in debates such as that
over outsourcing and job losses.
Earlier globalization eras also ended because of the
impact of external conflicts. Wars, even small wars, make
people think more in terms of security and relative gains
and losses, and less in terms of mutual advantage and collective goods. Foreign-produced goods become a threat
to national security, and are excluded even if that exclusion carries a high cost. Migrants are also obvious security
threats.
In a world obsessed by conflict, the rules that are necessarily required in operating an interdependent global
order are reinterpreted as being the arbitrary imposition of
a hegemonic power. In the late nineteenth century globalization, foreigners saw Britannia as ruling the waves because she waived the rules. In the early twenty-first
century, many non-Americans see globalization as an extension of American power and reject it on these grounds,
even though they may know that this rejection will be
costly and will increase poverty.
Many modern critics of globalization in both developed and emerging countries claim that they want not a reversal but a better or more human or less imperial sort of
globalization. They don’t recognize sufficiently how vulnerable the phenomenon of globalization is, and how high
◆
are the costs of a reversal.
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